There are various life events that call for an appraisal. In many cases, it is required that the appraiser and appraisal be USPAP compliant (What is USPAP?). Here are just a few such occasions when it is required or advisable to get an appraisal of your personal property.*
INSURANCE COVERAGE
If you want to make sure your high-value art collection is covered by your insurance plan in the event of theft or damage, the insurance company will likely require an up-to-date appraisal of your scheduled property. It is advised to have an appraisal of your personal property done every three to five years to make sure the values are as current as possible.
DAMAGE AND/OR CONSERVATION
If you have damaged property due to an accident, fire, flood, or other disaster, you will need the services of a professional appraiser to determine the value before damage, the cost of conservation (if applicable), and the value after damage. The appraisal will help you decide if the cost of conservation is justified against the value of the art, and/or to support a claim to your insurance company.
CHARITABLE DONATION
If you donate personal property to qualifying charitable institutions, you can receive a tax deduction on your federal income tax. The IRS will require itemized deductions and, when applicable, a qualified appraisal to demonstrate the value of the property.
DEATH IN THE FAMILY
When a person passes away, the value of the Estate may be subject to federal taxes (colloquially referred to as the Estate tax or “death tax”) if the value of the property exceeds a certain amount. Depending on where you live, there may also be Estate or inheritance taxes due to the state. A qualified Estate appraisal is advised to demonstrate to the IRS and/or local governments that the Estate is or is not subject to the taxes.
Additionally, if the dispersal of property has not been specified in the decedent’s will, an appraisal of the full Estate is helpful for executors to fairly distribute property to heirs.
ESTATE PLANNING
Consider talking with your lawyer or accountant about how you can safely and legally minimize taxes on your Estate when you pass (see, for instance, the IRS’s Estate tax and gift tax information**). This will often include the need for professional appraisals of your assets and property.
GIFT TAX
As of 2019, you can gift up to $15,000 in value to someone in a given year without any tax penalty. But if your gift(s) to someone exceed $15,000 in value, you (the gift-giver) owe taxes on the dollar after $15,000 (e.g. if you give someone a gift worth $20,000, you owe gift taxes on $5,000). This gift would need to be declared to the IRS, with a qualified appraisal demonstrating its value for tax purposes. Note that unified credit can be used against gift and Estate tax; be sure to consult with a lawyer, accountant or financial planner about the best strategy for your gift-giving and tax-paying!
DIVORCE
When separating from your partner, an appraisal of your shared assets—which includes tangible property—will aid in the mutual and equitable distribution of your property.
DEBT
If you must leverage your personal property against any loans or debts, your lending institution will require an appraisal of your personal property to determine its collateral value against the loans.
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